U.S. consumer spending on big-ticket and low-cost household goods promises to be strong in 2003. Economic and political uncertainties do not appear to be dampening sales of new housing, and consequently, appliances and housewares, according to forecasters.
Housing construction companies were more optimistic in December than they had been in two years, reported the National Association of Home Builders. The Washington association's market index was at its highest level since November 2000.
New home sales are turning out to be higher than expected, despite the slow economic recovery and the threat of war with Iraq, said NAHB chief economist David Seiders. Continuing low mortgage rates are a key driver, NAHB explained.
Major appliance shipments, loosely tied to new housing, should grow for the third consecutive year in 2003, according to a forecast from the Association of Home Appliance Manufacturers in Washington. The industry group forecasts a 1.5 percent increase this year, coming on the heels of a 5 percent rise in 2002. The outlook for kitchen cleanup appliances, like dishwashers, and refrigerators and freezers is especially promising, AHAM said.
Healthy sales in 2002 were reflected in financial results of two major appliance firms. Whirlpool Corp. reported net income of $101 million in the third quarter, vs. a $94 million loss a year earlier. Maytag Corp.'s $55.6 million net income was up 48 percent over the 2001 period on a comparative basis.
Whirlpool Chairman and Chief Executive Officer David Whitwam attributed his firm's performance to product innovation, restructuring and productivity improvements. On the innovation front, it drew a lot of attention when it introduced the Duet clothes washer and dryer set. The stackable appliances promise big energy savings and optimal cleaning performance through ``smart'' automatically adjusted operating conditions.
Maytag's financial improvement resulted from integration of the Amana purchase last year, cost reductions and product innovation, according to Ralph Hake, chairman and CEO. Despite a challenging environment, Hake predicts sales growth in 2003.
Both firms and their competitors continue to restructure and streamline to cut costs. Maytag, for example, recently announced it will close its 1,600-employee refrigerator plant in Galesburg, Ill., and move production to a new facility in Reynosa, Mexico. The Newton, Iowa, company also plans to retool its plant in Florence, S.C., to make a new laundry product. Cooking products made at Florence will move to Maytag's main cooking plant in Cleveland, Tenn.
Housewares will benefit from low interest rates that drive housing and furnishings sales, and from trends for consumers to spend more time at home, predicts the International Housewares Association in Rosemont, Ill. The U.S. housewares market was worth $75.3 billion in 2001, the latest year for which IHA has figures.
``The decline in short-term interest rates has translated to an increase in discretionary dollars that is stimulating home buying and products related to the home,'' noted Ira Kalish, chief economist for Retail Forward, a consulting and market research firm based in Columbus, Ohio.
``As consumers see their [investment] portfolios shrink, they're probably going to be inclined to nest more - which puts them in the kitchen and buying kitchen products,'' explained Linda Graebner, president and CEO of vacuum packaging systems maker Tilia Inc. of San Francisco.
Newell Rubbermaid Inc. expects sales growth of 2-4 percent this year, excluding contribution from any new acquistion. The performance would follow a big hike in sales and profit in 2002. Third-quarter sales were up 10 percent to $1.9 billion while net income before charges hiked 34 percent to $122.9 million.
The housewares giant, already diverse, is branching out even more. The Freemont, Ill., company recently agreed to buy American Saw & Mfg. Co., a major producer of power tool accessories and hand tools under the Lenox-brand name. The deal will strengthen Newell Rubbermaid's already big tool-related businesses, American Tool and BenzOmatic. All are part of its Levolor/ Hardware group, which in 2001 logged $1.4 billion in sales.
Newell Rubbermaid's CEO, Joseph Galli, is no stranger to the tool industry. He had a long career at Black & Decker Corp. before stints at VerticalNet Inc. and Amazon.com Inc. and before joining Newell Rubbermaid in January 2001. The company, however, continues to invest in its plastics businesses. It plans to spend about $90 million to upgrade its Home Products Division and has ordered 45 Husky injection molding presses in a deal worth more than US$30 million.
Despite rough spots in some global areas, Tupperware Corp. is faring OK in North America. Sales in the region grew 2 percent in its third quarter while profit was flat. Its U.S. sales force has grown by 7 percent. Europe, Tupperware's biggest market, also was its strongest. Weak areas include Latin America, South Korea and the Philippines. Overall, the Orlando, Fla., firm's sales grew 2 percent to $244.3 million in the third quarter. Net profit was $8 million, compared with a loss of $12.6 million a year earlier. The firm recently advised analysts it expects full-year 2002 sales will be down slighly.
Tupperware mainly sells direct but it is hedging its bets by boosting in-store sales. The company recently agreed to offer products in all Target Stores in the United States.